Compound Interest Calculator
Project how an initial deposit grows over time when interest compounds monthly, with an optional recurring monthly contribution added to the balance.
Formula & methodology
The starting balance grows using A = P(1 + r/12)^(12t), where P is the principal, r is the annual interest rate, and t is the number of years. Monthly contributions grow separately using the future value of an annuity formula and are added to that result.
All growth in this calculator compounds monthly, which is a common convention for savings and investment accounts.
Source: Investopedia: Compound Interest
Worked example
Example: $5,000 invested at a 7% annual return, compounded monthly, with a $200 monthly contribution for 20 years grows to roughly $124,400. Of that, $53,000 came from the initial deposit plus contributions, and about $71,400 is investment growth.
Frequently asked questions
- Why monthly compounding instead of daily or annual?
- Monthly compounding is a reasonable approximation for most savings accounts and investment projections. Daily compounding produces a very similar result for typical timeframes; annual compounding produces a slightly lower one.
- Does this account for inflation?
- No, the projection is in nominal (today's) dollars. Long-term purchasing power will be lower than the raw number shown once inflation is factored in.
- Is a fixed annual return realistic?
- Real investment returns vary year to year. This tool assumes a constant average rate to make long-term projections easy to understand, not to predict actual market performance.
Practical tips
- Time in the market beats timing the market: starting 10 years earlier with smaller contributions usually beats starting later with larger ones, because compounding needs time to work.
- Automate your monthly contribution so it happens before you have a chance to spend the money — consistency matters more than the exact amount for long-term compounding.
- Check whether your account has fees (expense ratios, account maintenance fees) — even a 1% annual fee can quietly erase a large share of your compounded growth over 20-30 years.
Results are estimates for general informational purposes only and do not constitute financial, tax, or legal advice. Always confirm important figures with a qualified professional or your lender before making a financial decision.